The War of the Pipelines: Russia vs US

The escalation of the Syrian conflict is about many things, but chemical warfare is not one of them. Primarily, the "proxy war" in Syria is about geo-economic control. Those that have, those that want to keep it, and those that want it. It's pretty much the same game that has played out through out history. The only real difference is the capacity of many sides to end humanity in the process - which makes the responsible use of the game's rules essential.

The Russians have the natural gas monopoly over Europe. They have a strategic and economic advantage they want to keep. It allows them to exercise extreme influence over countries that used to belong to the USSR or the Eastern Bloc - like Poland, the Ukraine and others. It gives them a strong hand in negotiating with other western European countries like Germany in particular. The Americans are in a different situation. Their geo-political interests are in weakening Russia and China's economic strength thereby maintaining their own international influence and control. They regularly "duke it out" in minor conflicts all over the world - most recently in Africa and of long standing the Middle East. Critically, in this international game of chess, they never make it between themselves - until now.

The region encompassing Syria, Iraq, and Turkey has historically been the land bridge between West and the East. That makes it strategically important to control, or at least deny to the other side. Qatar has a giant reserve of natural gas (at least 30 trillion cubic feet) that it wants to export by pipeline to Europe. The Saudi's want to do the same. In 2009 President Assad of Syria refused to sign a pipeline agreement to build a pipeline from Qatar to Turkey. Turkey's established goal is to be the centre of all pipelines between Europe and the Saudi area. Assad's established goal is the same for Syria. Assad is in control of Syria. Russia is in control of Assad. Russia doesn't want to lose control of the European gas market. It's using Assad to make sure any such proposal remains just that - a proposal. Instead, Assad signed onto an Iran, Iraq, Syria pipeline proposal. Iran is a minor natural gas producer and imports most of its gas from Russia. Such a pipeline then tends to be a regional pipeline that doesn't threaten Russia's position in Europe.

However, using that old slogan, it is not in the "national interests" of the US, or its Saudi allies, or even its Israeli allies, to allow this to happen. It’s also not in the interests of Russia, or its Iranian allies, or its Syrian allies to allow the Saudi-US challenge to be successful.

In fact it is so crucial to both the US, and some of its European and middle-eastern allies that an insurgency was propagated on Syria - to replace Assad's government. Here, so far, it has been Saudi Arabia vs. Iran as each camp’s local powers use their pawns to duke it out. Iran using its Shia alliances including the Alawites of Syria, Hezbollah of Lebanon, and Iranian forces. Saudi using its Sunni allies in Syria, Iraq, Jordan, and even Lebanon. In addition, Saudi has brought in Al-Qaeda forces and even Chechens that it finances. To underscore that point, Saudi Intelligence Chief Prince Bandar bin Sultan met with President Putin. He used a carrot/stick approach with him. On the one hand he was willing to offer Russia $15 billion in military contracts, and a new partnership in natural gas exports. On the other hand he made it clear that the "new Syrian" government would be under Saudi control and he controlled the Chechens meaning he could create peace for the Russian Olympics – or presumably the reverse. Putin was naturally infuriated by the stick approach, and the challenge to Russian influence and control in Syria and the European market. He turned it down.

Now we are left with the inevitable result of this poke in the chest game - war or humiliation. There is no more middle ground. One superpower or the other is going to lose and the result will effect the world. Already we have seen the US bring massive naval and air assets into the region. Today it was reported the US Sixth Fleet carrier task force is moving in to join the five to six ships already there, not including subs. Britain and France also have large air and naval presences there. Now we learn Russia is sending 12 ships into the region to join the fleet already there, and today a spy ship was added to the number. That does not include the air assets of Saudi or Israel, nor does it include the ballistic missile forces of Iran or Syria.

The US build makes a mockery of the US position that they are simply going to launch 100-200 cruise missiles into Syria. Their missile frigates already in place could manage that. No, it appears the US is going in to take control of the situation by destroying Syria's air defence forces, bombing Syrian military units, imposing a no-fly zone, and changing the regime just like Libya. No question. Nowhere near the force built up is required for a limited strike. In the last several months the US has also placed Patriot anti-missile batteries surrounding Syria in Jordan, Israel, and Turkey. The mission, obviously pre-planned, is to control Syrian airspace and destroy the regime militarily. As the Saudi prince said, Saudi Arabia will control the new government in Syria, and it looks as though the Saudi armed and funded militants on the ground in Syria are meant to be that force.

All this may just make most in the West roll their eyes and say "oh the US is thumping out another dictator, and who cares?" This time is different though. This time Russia sees its vital interests not just being threatened, but actually in danger of being destroyed. That us why Russia's navy are stepping in, and that is why things have never been more dangerous. The proxy war has had its mask removed; the players are now facing each other in a fight that could be disastrous for the world. Neither is prepared to back down for the same reason - national interest. It's fashionable to say religions cause wars, but in reality it is "national interests" as defined by those that define. In this case the national interests are pipelines and control. The suffering of the Syrian people has absolutely nothing to do with it.

Hydro Quebec's Court date with Nalcor

On the 28th of August, a little over a week from today, sudden death should be coming to the Lower Churchill project. Hydro-Quebec has filed for a declaratory judgement in Quebec Superior Court against CFLCo. According to Hydro-Quebec, CFLCo has been selling power over the 300 MW recall limit to Newfounland and Labrador Hydro in contravention of the Power Contract (1969), and have been doing so since June, 2012 -which is also when construction began on the Muskrat Falls project.

Couple problems with this. The most obvious one is of course it breaks the Power Contract which means, among other things, we will be responsible for damages to Hydro Quebec. However, the bigger by far problem is a ruling against this province means the Water Management Agreement is effectively gutted.

Nalcor's publicly stated plan is two fold. Firstly, Nalcor asserts it can take power from the Upper Churchill as "banked power". However, the Power Contract does not allow any taking of power other than the 300 MW of recall we already get, and the 225 MW that was Twinco's share that now belongs to CFLCo under the Shareholder's Agreement. Second, Nalcor and the Premier have stated Hydro-Quebec is only entitled to a fixed block of power once the agreement renews in 2016, and the remainder belongs to Nalcor. Under that scenario Gilbert Bennett of Nalcor has publicly stated the province could take 1500 MW of power. That power would be purchased from CFLCo at the same price Hydro-Quebec pays and be resold for a profit of about $600 million a year.

However, it's just pure fantasy. The Supreme Court of Canada ruled unanimously in 1984: " the company signed a contract (the Power Contract) with Hydro-Quebec whereby it agreed to supply and Hydro-Quebec agreed to purchase virtually all of the hydro-electric power produced at Churchill Falls for a term of 65 years." That means CFLCo or Nalcor or whomever is not entitled to any power from the Upper Churchill, other than the recall power, until 2041. Period. End of story. It's plain English.

The second right Hydro-Quebec wants declared is its right to operate the plant to its benefit. The aim of course is to stop Nalcor, and the government's Water Management Committee, from taking operational control of the facility that the Water Management Agreement allows them to do. The Power Contract again clearly states that both CFLCo and Hydro-Quebec recognize and agree to operating the plant for Hydro-Quebec's interests.

The point is that on August 28, 2013 Quebec is going to win. What does that mean in reality? It means that the two pillars the government's Water Management Agreement are built on will be destroyed. Considering that CFLCo could only argue in court it was taking this power based on provisions of the Water Management Agreement, the Superior Court may find as well that this agreement is unconstitutional. It might go that far, or it might not. Either way, it guts the Water Management Agreement. Both Nalcor and Hydro-Quebec publicly say the court action is not about the Water Management Agreement, but it is quite obviously so. Even Dunderdale, firing from the lips as usual, stated in a moment of fury that it was meant to stop Muskrat Falls. She added that there were measures to "mitigate" such a ruling though.

Here is what she meant: " Force Majeure event means... (iv) action of any government, legislature, court...and despite all reasonable efforts...adversely affects the performance by such Party of its obligations under this agreement." In other words, Dunderdale was tipping her hand, by way of her mouth, that despite a court decision on the Power Contract rights she intends to proceed with construction of the dam, and taking the power, etc under the Force Majeure terms in the Water Management Agreement.

So, on the one hand, the Superior Court decision in Quebec should stop the project in it's tracks, it won't. Hydro-Quebec will then sit back and watch us build the dam knowing full well it has its rights secured, and that it made our government fully aware of those rights. In that way it can go for damages so large as to bankrupt CFLCo. That's why my lawsuit to get an injunction is crucial. Hydro-Quebec won't stop us from cutting our own throats. Why would they? They have the total Upper Churchill facility to gain. It's up to us to stop the government and Nalcor from doing this damage to us. So, in a week you can expect Hydro-Quebec to win in the courts and our government/Nalcor to continue the Muskrat Falls project. Meanwhile, its been almost three weeks since my leave for appeal was filed here, and Nalcor has been delaying the setting of a date for its hearing.

Egypt-into the Heart of Darkness

The slaughter of lives and the ideal that is democracy is reverberating from the narrow streets of Cairo to the hearts and minds of free men and women throughout the world. The fact that it is Muslim blood now, or Christian or whatever later is irrelevant to the unfolding tragedy. Death does not know nationality or religion.

In the West we must face the very real stain that we watched while an infantile democracy was cut down by a military obsessed with control. As an Orwellian travesty unfolded in the overthrow of the unpopular Morsi government, democratically elected as it was, the great western powers sat on their hands of self-interest, and gazed at the dethroning of the foundations of their very own societies - democracy.

Democracy. The moral authority to go govern. Given by the people. Not all the people mind. It never is. There are always oppositions. That is part of democracy to. Sometimes the governing party loses the support of the majority, and even its base. When Mulroney left power his party's popularity was about 25%. He brought in free trade, the GST, Meech Lake, etc. None of which was supported by a majority. People protested. They protested for a long time. They were not slaughtered in the street. They were not wounded in the thousands. And, despite the probable fantasies of many, the military did not remove him from power and replace his government. Nor did they unilaterally amend or suspend the Constitution.

Why? We know better. We know that politicians are going to put their friends in high places. We know they are going to represent and defend their interests. We understand that, as repugnant as it is, the pure ideals of democracy are often stained by the dirty hands of men and women of greed and ambition. Yet, at a deeper level, we know that to betray our end of the democratic deal is to defile it as much as those who do so at the highest levels. That if we let go of the sanctity our society is built on, at least in our hearts, that all that remains is anarchy - rule of the mob. We understand that is where our society evolved from, and not where it is meant to return to.

That is our great legacy to the world. Our example of living in peace with ourselves and others. That the rule of law governs us all, the mighty and the citizen, and to be any other way would be to fall back into the law of the jungle. That is where Egypt has now gone, and we, to our absolute discredit, have turned our backs on the very principles our own society is based upon.

We have given the extremists, whatever their bent, their war cry: democracy means nothing unless it is convenient; the rule of law means nothing unless it is convenient; the dignity of men and women can only be defended by the rifle barrel; respect and tolerance are for the weak; and solace can only be found in the tightly bound confines of our beliefs - whatever they may be.

Quietly watching the Egyptian army destroy everything we believe in, simply because it suits our immediate tastes, is a lesson that is only bound to come back to us many times multiplied. The world watches, and as it watches, the wrong lessons are learned.  The bar is set. The rule of the mob over the rule of democratically enacted law is a terrible precedent. Why would anyone think that precedent would only be confined to Egypt or the Middle East, or wherever? Who’s to say that as citizens become disenchanted with high unemployment in Spain, or wherever that they would not see this as a legitimate means for change there? Same goes for Greece, or Ireland, perhaps even here. This is the danger of washing our hands like Pontius Pilate. It is our sin above all others because we know better.

The Canadian government, and the US government for that matter, are being beyond irresponsible to offer the resistance of Neville Chamberlain "peace in our time" to the atrocities of the Egyptian military. To accept that the Egyptian military had a right to overthrow an elected government because it was not representing all its citizens is beyond irresponsible actually. It is akin to watching the rape of democracy, and doing nothing. Doing nothing while Egypt descends into the heart of darkness - and takes our great ideals with it.

The End of Feudal Politics in Newfoundland and Labrador

Friends say to me often that others approach them, and ask them "You know him, what is Cabana's agenda." I suppose it's a fair question. People don't always have an agenda when they do things they believe in, but in this case, to be honest, I do have an agenda as well.

Shortly after being railroaded by the fixed leadership race for the PC Party I gave an interview with the Telegram, January 24, 2011 to be exact. I was shocked that such a violation of fundamental democratic principles could happen in my country. I made a promise to myself and the people of Newfoundland and Labrador that I would end the "feudal politics" of this province. A tall order to be sure, and not something you can ever hope to do by yourself, but an honourable goal none the less. I made the following statement to that paper, which holds true today:

"They're in for a fight if they want to fight."

Apparently, the political establishment, small as it is in this province, never took that promise very seriously. They instead resorted to defiling my family name, insulting me on the airwaves of the province, blackballing me in the halls of power. In other words, the usual treatment for anyone who dares to challenge the established order and their plans for the province and its people. What they did not bank on, frankly, is the power of the human spirit. Of course that can be said of many dictatorships new and old around the world. What can also be said is that "an idea is more powerful than any army."

However, change requires leadership. It has always been that case since the beginning of time and it remains true today. What people have in their hearts may remain just there if there is no leadership to bring that change to life. And as I learned as a young military officer, you can only lead from the front. As I also learned: "Who dares Wins".

So, over the last two years, I've taken that training to heart. I've placed myself, as one local radio commentator noted, "in the centre" of the battle over Muskrat Falls. The same commentator at one time referred to me publicly as a "dangerous zealot". Another local blogger, Edward Hollett, referred to me as a "martyr on a zealot's cross."
Apart from the inflamatory nature of their words, both have some points in common: to stand up for what you believe in is futile; to advocate against the wishes of the political class is dangerous; and to be the one that leads that change is self-serving. All the hallmarks of people who have bought into the political cast system.

Canada is not, however, India. We do not believe in cast systems. They are a relic of a different age long since relegated to the history books. Yet, in this province the political and business cliques have decided this system suits them well, and they have no intention to change it. They perceive such threats to their dominance as revolution, when in fact it is evolution. And this is their great sin.

Muskrat Falls, in fact the Lower Churchill project, is the battle ground that this conflict will be decided. Many of the people have been deeply offended by Bill 29, which stripped the public of essentially any right to access to information that the government possesses. Aboriginal people's have been denied the ability to stop their lands and waters from being poisoned by mercury. Citizens have been lied to about the very legality of the water management agreement that allows the project to go ahead. The project has been pushed ahead. Not by the PC party, but by all members of the political establishment's elite. There is as much silence or support amongst some of the Liberal party back room as well. The "boys" in St. John's have had their way, and the rest have had to fall in line. Those days are over.

The provincial political establishment is now facing its very own armageddon - one of its own making. The Lower Churchill project they so desperately imposed on the people of our province is mere weeks from imploding. An implosion that will shake the very foundations of the political establishment, and forever change the way Newfoundlanders and Labradorians view their political masters and themselves. A long over due destruction of the political class that has kept them in servitude for hundreds of years.

A new political and business reality is about to be born on the Rock. The era of feudal politics is dead. For the people of this province it couldn't come soon enough.

Is Newfoundland and Labrador Ready to Lose the Upper Churchill?

Is Newfoundland and Labrador ready to lose the Upper Churchill hydro-electric dam and facilities? Every single Newfoundlander and Labradorian would say a resounding "No". However, we are getting very close to that position, and here's how.

Just say for a moment that Hydro-Quebec or I are successful in the challenges on Muskrat Falls in Court, but Nalcor keeps building the dam and taking power from the Upper Churchill as it apparently is now (according to Hydro-Quebec's Statement of Claim). Where does that leave us? According to the legal opinion given by lawyers at the province's Natural Resources department it leaves us with billions in penalties and costs to Hydro-Quebec  which, according to the opinion, would bankrupt CFLCo unless the provincial government dumped money in to pay the costs off. However, it's not that simple.

When Dean MacDonald and Brian Tobin agreed to sign the Shareholder's Agreement of 1998, they gave Quebec some powers over that scenario. The Agreement gives Hydro-Quebec a veto over the following as it pertains to CFLCo's finances:

3.3.2 Any sale, assignment, transfer, lease or exchange of all or substantially all of the property of CFLCo or any Subsidiary of CFLCo.

3.4.2 The adoption of the annual operating budget and the annual capital expenditure budgets of CFLCo and any variations thereto which would result in the increase or decrease of any such budget by $10 million in the aggregate or $5 million for any particular budget item.

3.4.4 The issue of any Shares or any Rights, except for Rights attaching to subordinated debt obligations, or the issue of any shares or any debt obligations of any Subsidiary of CFLCo.

3.4.5. Any loan or borrowing on the credit of, or any issue, reissue, sale or pledge of debt obligations of, or the grant of any financial assistance, guarantee or security by CFLCo or any Subsidiary of CFLCo in each case having an aggregate principal amount of $25 million or more (whether it be one or more trenches), except for subordinated debt obligations.

8.1 Pre-emptive rights. Subject to Sections 8.3 and 8.4, no shares or rights may be issued by CFLCo to any shareholders or to any other Person (the "New Issue Securities") unless CFLCo shall have first offered it to N&LH and any permitted transferee of N&LH and to HQ and any permitted transferee for the same pro rata to their respective Pro Rata Shares, at the same price and on the same terms and conditions as those offered in respect of the New Issue Securities.

In other words, Hydro-Quebec could veto CFLCo from going into bankruptcy. Or, more dangerously, it could veto the acceptance of any financial assistance by the provincial government to keep CFLCo from going under.

If CFLCo is without funds to pay Hydro-Quebec the court awarded costs it would be unable to operate the dam. It would frankly be unable to meet its payroll. Should that happen, the Power Contract states:

             Should CFLCo, not being prevented by any event of Force Majuere, be unwilling at any time to operate the Plant, and should the plant then be operable, Hydro-Quebec, if not then in default here-under, shall have the right to cause the plant to be operated for the account of CFLCo in accordance with sound utility practises until CFLCo itself resumes such operations.

So, in other words, Hydro-Quebec can force CFLCo not to accept financial assistance from the province, and it can refuse to let CFLCO go bankrupt, and simply take over the operations of the plant while the bill for damages to CFLCo keeps rising to the point of being impossible to pay.

If the provincial government tried to sell some or all of its shares Hydro-Quebec gets first rights to them. If the provincial government tries to issue bonds Hydro-Quebec gets first rights to them as well. And that's only if Hydro-Quebec doesn't use its veto to stop that from happening in the first place.

Consider though that the province wants the Muskrat Falls dam operational by 2016, and consider damages start from that point, Hydro-Quebec can sit on those damages year over year until 2041. By 2041 those damages would be, or could well be, in the vicinity of $25 billion, not including interest. At that point Newfoundland and Labrador would have no choice, but to surrender the dam in its entirety to Quebec.

Is this what we really want? Are we ready to lose the Upper Churchill to Quebec?

Nalcor's Grand Larceny Over $100 Million

Grand Larceny means the unlawful acquisition of another's property on a big scale. That's what we have with the Water Management Agreement Nalcor had the Public Utilities Board here impose on CFLCo. It appears to be a large plan from the get go of former Premier Danny Williams while in office. You see, although the WMA says it must respect previous power contracts there is a catch - Force Majeure.

Force Majeure is a legal term in all contracts, which loosely means an act occurring that let's both parties to a contract out of its binding commitments. Normally a Force Majeure event would be an act of God like weather, or war, or insurrection, that kind of thing. In the case of the WMA it is given a whole new meaning. Here is its definition and application in the WMA:

" Force Majeure Event means an event, condition or circumstance or combination of events, conditions or circumstances beyond the reasonable control and arising without the fault or negligence of the party making a claim pursuant to section 14.4 of this agreement (the Affected Party) including without limitation:

(iv)  action of any government, legislature, court or other governmental

authority, compliance with applicable law, regulation or order of a govermental authority.

And which, despite all reasonable efforts of the Affected Party to prevent it or mitigate its effects, adversely affects the performance by such Party of its obligations under this agreement;

Okay, so that's a mouthful, but it essentially means if the government owned companies Nalcor or CFLCo are prevented by government imposed law or conditions from respecting the Power Contract with Hydro-Quebec, well, its not their fault. Even though the two companies are Crown corps, well, you get the idea. It’s a "wish we could do it b'ys but our hands are tied by this government who is a whole seperate entity from us" kinda thing (sarcasm intended).

Then there is this on the same issue:

" An Affected Party shall be excused from the performance of its obligations hereunder or liability for Damages to the other party, if and to the extent it shall be delayed in or prevented from performing or carrying out any of the provisions of this Agreement, except the   obligation to pay any amount when due, by reason of a Force Majuere         Event, provided that an Affected Party claiming a Force Majuere Event shall notify the other party of such Force Majeure Event, and shall use reasonable efforts, at its own cost, to mitigate the effects of the relevant Force Majuere Event and to remove the condition that prevents the Affected Party's performance, and shall perform its obligation as soon as possible and to as full extent as possible."

Loosely translated: " It's a get out of jail free card for Nalcor and CFLCo."  It means that Hydro-Quebec can not sue CFLCo or Nalcor if the government, through regulation, or say interpretation of the Power Contract, decides to take power from the Upper Churchill by using the WMA to do it. It's plain and obvious this is unconstitutional, and a violation of extra-provincial civil rights, but let's forget that for a moment. Let's look at the why.

Both Williams' grand Energy Plan 2007 and government policy require "full use" of the Churchill River's waters for power generation. Nalcor and CFLCo are required by law to follow that policy. That is their "Force Majuere Event". Out of their hands they will say. Just following government policy and regulation they will say. We would like to obey the Power Contract, but the government has our hands tied they will say. And so it goes. But what is the government of Newfoundland and Labrador aiming for?

How about in the vicinity of 1500 almost free megawatts of power from the Upper Churchill? Gilbert Bennett is on the public record, just once mind you, saying Hydro-Quebec is only entitled to about 3500 MW when the Power Contract renews in 2016. He says that once you account for that and 525 MWs of recall and Twinco power, there is a juicy bundle of about 1500 MW left over that Hydro-Quebec is not entitled to. His implication is that this power can be taken by Nalcor. Forget the fact the Supreme Court of Canada already found that concept to be illegal for a moment.

What is the big deal about 1500 MW of power you ask? Well that is about 28% of the power the plant could generate if it ran at full capacity. Yes you say, but Hydro-Quebec won't allow the plant to run at full capacity. They will just hold the juice back and produce what they need. They have the power to do that under the Power Contract, and have been doing it for almost 40 years you say. Well, that's all true, but the new WMA changes all that. Under the WMA all plants operating on the Churchill River must operate at 100% capacity. That would mean that extra 1500 MW will be there, by law.

So you ask, what is the big deal of having 1500 MW available for us? Well here is the kicker. All Nalcor has to do is pay the paltry price that Hydro-Quebec pays for the Upper Churchill power .002 cents per kwh starting in 2016. Nalcor can then sell the power and will make about $560-600 million per year in profit. Holy shit you say! That is the motherload considering Nalcor is only making less than a hundred million now, and is subsidized to do that by the government. What's wrong with that you say? Are you trying to give comfort to the enemy you say?

Well, it's like this, it would be a great plan...if it were legal. You see, the Supreme Court of Canada already ruled, in 1984, that Hydro Quebec owned all the rights to the power produced at the Upper Churchill til 2041, except that 525 MW of recall and Twinco power. Therefore, taking that power and "recalling" it is illegal. It means that we are stealing power we gave away until 2041.

Big deal you say, what are they going to do about it? Well, the what is a lawsuit I would imagine, along with an injunction no doubt. But what's the damage? Here I'll quote from the Department of Natural Resources legal opinion. It's on Section 92 rights to the water, but the result of a wrong approach is the same:

" In previuos litigation in Quebec relating to the recall case, also described earlier in more detail, the Quebec Courts found that CFLCo would be in breach of the Power Contract if it failed to deliver, even in response to a demand for Power from the Province.

If a court followed this reasoning, CFLCo would be in breach of the Power Contract once it started diverting water to Newfoundland and Labrador from Hydro-Quebec. In these circumstances, Hydro-Quebec would pursue monetary damages from CFLCo. The amount of such damages cannot be accurately predicted, but would be significant. This is because the purpose of such damages will be to place Hydro-Quebec in the position they would have been in had CFLCo not breached the contract.

Any damages would then raise another issue - whether CFLCo would be able to pay such damages. Any level of damages would be expected to drive CFLCo into insolvency and likely bankruptcy, unless 1) CFLCo was paid sufficient amounts for its redirected power in the province to meet Hydro-Quebec's damages demands or 2) Hydro-Quebec or the Province injected sufficient funds into CFLCo to keep it solvent...while the exact amount of compensation is unknown it can be reasonably    expected to be in the billions of dollars." Legal Options: S92A, Good Faith and Regulatory Proceedings in Quebec, November, 2012, Department of Natural Resources.”

So there you go folks. The big plan was to steal 1500 MW, use that profit to subsidize below cost sales to Emera in Nova Scotia, and put the rest in the bank. The results: Quebec lawsuits, invalid WMA, no water to run the dam at more than 20% capacity, billions in damages to Hydro-Quebec, and a bankrupt CFLCo. Grand Larceny of $500-600 million per year may have seemed like a good idea to our former premier, but somebody should have told him: " Crime doesn't pay."

On Mainlanders, CFAs and the like

This post is personal to me. It's not about cold, abstract politics. Nor is it about personalities, graft or corruption. No, this post is what it means to be degraded. Degraded not for who you are as a person, as a father, as a husband, as a son. Not for what you have accomplished in life or the people you have touched along the way. No, this degradation is solely based on your place of birth.

While Newfoundlanders like to be seen as friendly and hospitable, there is an ugly side. People born outside the province, who move to the province, are referred to as "mainlanders" or "come from aways" (CFAs is the common term used). I have even heard the term "foreigners" used. The terms are not meant as playful labels. They are meant to separate the newcomers from those born in the province, and the implication is these newcomers are somehow inferior.

My first experience with this prejudice occurred during a political convention of the PC party in St. John's. Sitting in the audience, and taking in my first political convention here, it was a time of real excitement. Joining me was my wife who, along with me and my family, had uprooted our lives out west to return to my roots (more of that later). On the stage was a gentlemen named John Dinn. I didn't know him from Adam, but he was a MHA and I was eager to take in what he had to say. He began talking about Canadians and then he said the words that struck my heart: "but we are better than them". The crowd roared with approval.

In one short moment I was instantly alienated from the people of my forefathers. In that one instant I realized that there was a poison in the water. A need to look down on others for a sense of superiority. A deep routed, commonly cherished place to retreat where at least among ourselves there were those beneath us. I have come to believe, through life experience, that those that look down upon others are compensating for something lacking in their own soul. A sense that without that common arrogance we might just vanish as a people. The opposite of pride. A great inferiority complex. That to make ourselves strong we must keep others down.

I was shocked, and remain so, that the Newfoundland I was brought up with in family stories was so tragically different. You see, my people come from here. In 1820 my great-great grandfather emigrated to Newfoundland from Tipperary, Ireland, along with many others at that time. His name was Micheal O'Meagre. He settled in Bonavista Bay, and had three sons. Two sons, Catholics, married Protestant women in Greenspond, and were banished from the family - such was the religious intolerance of the day. The third son, my great grandfather, married a Hollohan from Summerville, settled on Burnt Island, and fathered a large family.

Times were hard then, and the two eldest boys went to Montreal to work in construction.  In 1907, while returning from Summerville to Burnt Island, my great grandfather William Maher (as the name had been changed to) and a Kelly were struck by the boom of his schooner, knocked over board, and their bodies were never found. My great grandmother struggled to feed her daughters after that, and they all moved to Montreal to join her sons - my grandmother being the youngest. They struggled, and yet they persevered.

I never knew my grandmother to ever look down her nose at another. She was a strong woman who spent her life looking after her family. She was quiet, wise and kind. The tragedies of her life, including losing her father at a young age, never broke her spirit or poisoned her temperment. Her stories of Newfoundland, and the family were always tempered with humility. Her pride came from deep within, and never at the expense of another.

It was with her spirit in mind that I moved to Newfoundland - in my mind returning to my roots, my ancestral home. Nothing prepared me to be seen as somehow unfit or inferior. Nothing prepared me to hear the anguish of my children as they suffered daily ridicule at school for being "dumb mainlanders" or "CFAs". Nothing can really prepare you for that kind of society-sanctioned hatred. Even in my own harbour. A local had asked to tie off his boat to my dock, which of course I agreed to. As is the case, we struck up our usual conversation. The topic switched to my children who had finally had enough degrading and moved back west with their mother. I explained to him why, and to my shock he began laughing. It was funny in his mind, as he explained, that Newfoundlanders were the butt of "Newfie" jokes, as he put it, and now the shoe was on the other foot. In disbelief I untied his boat. The sickness of deep hatred and contempt weighing heavy on my soul. Somehow, a victory could be stolen from the suffering of children?

My point in writing this blog is to shed a light. That hatred and false pride produce nothing but poison. Poison to the personal and collective soul. That Newfoundlanders can be proud of who they are without demeaning those that, by choice, become Newfoundlanders themselves. That there is no magic being born on these shores, but rather what is contributed while we live on them. That no society is of a pure blood strain, and emigration has always been a fact of life throughout Newfoundland's 500 year history. Without it there would be but a place. The pride and place that Newfoundlanders seem preoccupied with comes from lifting people up, and not tearing them down. A truly proud people are not disdainful of others, but welcome them as equals. This is the Newfoundland I hope to see. I say this as a Newfoundlander.

Back Stabbing the People of Newfoundland and Labrador

Financial crunch, requiring deep cuts and discipline, is the state of our provincial government's finances according to our PC government. On the radio waves, on the tv, all we hear is the necessity for cuts and lay-offs, but is it true? Well, frankly no, it isn't.

Despite all the foreboding of impending doom, oil revenues for 2012, $ 2.8 billion, were the highest ever. The province recorded a whopping $883 million budget surplus for the year. Just another in a line of offshore oil fuelled surpluses. It is strangely odd then that the province would lay-off 1200 employees, affecting all those families as well, and cancel numerous programs - including the West Coast Training Centre today. The mantra is austerity. The tool is responsible care taking of the treasury, but is that real? No, not even close.

Consider this: between 2005 and 2012 the province received $12.25 billion in offshore oil revenue - that's an average of $1.3 billion a year since 2005. Now consider this: the gross debt of the province is actually larger today than it was back in 2003, before oil income bloated the coffers. Specifically, the gross debt in 2003 when the PCs took over was $12.8 billion. Today, as of March 31, 2012, our gross debt $13.4 billion. In other words, despite bringing in over a $12 billion in oil revenue since 2003, the province is over a billion dollars further in debt. How can that be possible? It's called poor decision making.

The gross debt is made up of primarily three things: borrowings; unfunded pension liabilities; and group health and life insurance retirement benefits for public employee and politicians. In 2003 net borrowing was $6.5 billion, unfunded pension liabilities stood at $3.56 billion, and group health and life was $1.05 billion. Nine years later, and $12.25 billion richer in oil money, the same categories looked like this: unfunded pension liability $3.09 billion; and group health and life $2.09 billion.

So, if all that oil money came in over the last while where did it go? Clearly the oil profits were not used to really reduce these retirement liabilities. Back in 2003, the provincial government had a total of cash saved and invested of $441,855 million. Today, that same bank account is almost $2.5 billion ($2,442,963,000 as of March 31, 2012 to be exact).

The revenue went way up. The spending went way up. The bills of the future went unpaid, and the difference was left in the bank. It begs the question: Why the austerity program with so much money squirrelled away? There is only one answer to that: Muskrat Falls. Before you roll your eyes and say here we go, take a moment. The memorandum of understanding regarding the federal loan guarantee for Muskrat Falls requires the province to have a down payment of 35% down before it will guarantee any loans.

The province's estimate of its share of the project is about $6.5 billion. Projects this size never come in on budget, and normally have a contingency fund of 25%. Given that, the province is looking at raising at least $8.25 billion. That means the federal loan guarantee would require them to raise about $2.9 billion for their down payment. They had $2.4 billion in the bank as of March 31, 2012.

Bottom line, the province is laying people off, cancelling programs, not expending department budgets in a desperate effort to bank their down payment for Muskrat Falls. Simple as that. We are expendable in the name of a dam. Ask the people who lost their jobs, or the groups that lost their funding or their schools. Ask those desperately waiting for the construction of hospitals, or road paving, or a number of any other services. It's a real point of curiosity that the issue of the funds in the bank is not a bone of contention in our media or for our opposition groups for that matter. It seems that the knife never stops striking the people of this province in the back.

Doing the Right Thing at the Right Time-Liberal Leaders

Disappointing. That sums it up. The recent Telegram article on the position of all five Liberal leadership candidates on Muskrat Falls was recently aired for public consumption. The reporter, James MacLeod, noted that the Liberals official position, including a vote against the project in the House of Assembly, has been solidly against the project. In his article MacLeod illustrated the readily apparent conflict between what the leadership candidates are saying now, and the position the Party has taken. Conflicted indeed.

There was the predictable: Cathy Bennett cheerleader full stop; Danny Dumaresque opposed full stop; Dwight Ball and Jim Bennett arguing the deal is done so make the best of it. The one most bizarre response came from Paul Antle.

I had very high hopes for Antle. A well educated man now a resident of Ontario, he seemed to bring some very needed business counter-balance to Cathy Bennett's blinders-firmly-on point of view on Muskrat Falls. Yet, after MacLeod's article, that hope seems fully dashed. Consider this quote attributed to Antle in the article:
"No one is going to stop a hydro development that is half-constructed. No one would do that in their right mind, but we can revisit how this thing is financially engineered." Think that quote through for a moment.

First thing that jumps to mind is that Muskrat Falls is nowhere close to being half built. The transmission lines, one third of the project haven't even cleared all the aboriginal and environmental hoops yet, let alone constructed. The Labrador-Island sub-sea cable system and conversion sites are not constructed at all, ditto for the maritime link, same goes for the powerhouse and dam at Muskrat Falls or the much debated reinforcement of the quick clay plagued North Spur. In fact, the only real work that has been half completed is the site clearing at Muskrat Falls.

There is the obvious political critique of this position. Within the last month the largest poll ever conducted on Muskrat Falls showed support for the development free-falling. A project that once enjoyed a solid 70% support by the public was now reduced to 49%. In effect, Antle's position may be alienating the majority of the electorate (when I say Antle you can include the majority of the candidates in that one). Then consider the positions of the other two parties. The NDP is becoming the only Party opposing the project, and the Liberals are being portrayed as essentially of the same mind as the terminally ill PC party. Not a position most would conclude is enviable. Does the Liberal Party really want to frame itself in the public mind as PC lite? Or perhaps even more damning: Liberal Tory, same old story? These are dangerous political waters to be in, and already one toe has been dipped in the water to check the temperature. As MacLeod said: "scrambled eggs".

Then there is Antle's statement that nobody in their right mind would halt a half built project. Really? Hmm. Don't tell the Ontario Liberal government that. They just did that very thing by cancelling two partially built natural gas plants designed to produce electricity. He should know that - he's a Liberal and he lives there in an Ottawa mansion. The cost to the Ontario taxpayers is $800 million plus, but they stopped throwing good money after bad - apparently. There are also cases like the hydro-dam being built in Brazil that have been halted half built. Some may argue that cancelling the contract with SNC Lavalin would create too much cost, yet Hydro-Quebec and a number of private corporations have done just that.

Apparently, these governments and corporations are not in their right mind? Or are they? Does the responsible person realize when they have made a mistake? Do they have the courage to stop the damage before it becomes financially fatal? The answer is yes they do, and they do it all the time. Antle, and the other Liberal leadership hopefuls have seemingly lost sight of the number one essential ingredient of all great leaders - courage of conviction. If you accept that Muskrat Falls is flawed then you must advocate it be halted until those flaws are corrected. It may be the case that those flaws cannot be corrected in a financially viable way. If that is the case then it must be halted permanently. No corporation would do any differently. The Board of Directors would be sanctioned by the shareholders if they acted in such a way. They would even be legally responsible for such a decision.

So what does all this boil down to? Well, frankly, a lack of judgement. If you portray yourself as a responsible guardian of the public purse, one that would treat that budget as if it were your own, then you must make that your position in all things relating to how you intend to govern. To paint all those who want to see this project stopped as not in their "right mind" is to disrespect us all. Frankly, we get a lot of that from the existing PC government. We certainly are not looking for that in the replacement government. Food for thought gents.

Cathy Bennett's Complex Muskrat Falls Case

 Cathy Bennett, poster child for the St. John's Board of Trade, owner of nine McDonald's franchises, fingers in many business pots, and former Chairman and Director of Nalcor Energy, has decided to try and secure the leadership of the provincial Liberals. On the face of it Bennett is a very unlikely Liberal. However, times are changing. Her provincial PC party is in a state of collapse and pragmatism demands a change of colours. The primary purpose of course in control of the provincial governments budget by the St. John's business crowd, but that isn't the focus of this post. The focus here is a curious statement made by Bennett when announcing her candidacy for the leadership of the Liberals.

According to Bennett, support for the Muskrat Falls project rests on "a complex interweaving of multiple business cases." Curious statement for the public to digest, and one which she gave no clarity to. However, for those of us doing in depth study on the Lower Churchill project it rang remarkably true. It was, in a way, a hint. We are all familiar with the arguments about selling power to Nova Scotia, the Labrador mines, the Island and so on. Each of these "business cases" requires the power be sold at a significant loss, which frankly doesn't make much sense from a financial point of view to most of us - these parts of the equation are frankly not that complex. However, there is one crucial, central, and strategic business case that nobody, and I mean nobody is or has spoken of.

To find out what that central business case is you have to go back to Danny Williams strategic plan entitled the "Energy Plan", and the energy warehouse. The stated primary purpose of the plan was to utilize all the province's energy sources to their maximum capacity - including the Upper Churchill. To that end he amended the Electrical Power Control Act to force water management agreements on companies proucing power on the same river. Considering the Upper Churchill was the only situation the amendments applied to the target was obvious as was the aim - take power from the Upper Churchill by forced recall. The premise is outlined in the words of Gilbert Bennett, Vice President of Nalcor in charge of Muskrat Falls:

"Gilbert Bennett: Section 2.1 of the Renewed Power Contract entitles Hydro Quebec to take the Continous Energy in each month, including during the winter...the average production at Churchill Falls is about 34 TWh. If we deduct the 2.36 TWh and 1.97 TWh for recall and Twinco respectively, we are left with approximately 29.7 TWh for HQ, or approximtely 2.5  TWh per month. Interestingly enough, this means the plant on average will deliver on average just
over 3470 MW for HQ + 525 for NLH/Twinco (or 3995MW out of 5428MW) over the course of the month, meaning tat while Hydro Quebec can have additional capacity, they can not have it all of the time, as they will exceed their energy allowance. This point ensures their will be lots of opportunities to withdraw stored enegy from CF, even in the winter.


Translation, Nalcor's big plan is to "withdraw", which is recall, roughly 1500 MW from the Upper Churchill and transfer it to the Island. Under such a scheme Nalcor would pay the same rate for that power as Hydro Quebec does - by 2016 .002 cents a KWH. In other words, the province gets the power of Gull Island, without building Gull Island, fot the same price Hydro Quebec gets its power for - a master stroke. The massive profits on the sale of that 1500 MW would subsidize all the losses of power sales, and contribute all that "revenue" we hear about. Then add in the two lines being built from the Upper Churchill, each capable of carrying 1000 MW, to Muskrat Falls and beyond. Then consider this comment from Nalcor's magazine called "Outlet", dated Winter 2010:
" The current 800 MW design (under sea cable) has the capacity to be increased by a further 1000 MW, without changes to the operating voltage or overhead transmission lines."

Bottom line, take the power. Most would say what a great plan. Except, its not constitutional, and therefore it is illegal. In a sense it is like stealing. This is the great plan of Williams and company - which most certainly includes Cathy Bennett.

As former Chairman of Nalcor, and director, Bennett would have been fully aware of all these plans. When she says it is "complex" she means she can't discuss it, because if she were to reveal that plan the Courts would consider it a deliberate plan rather than an unintended consequence. The province is relying on that constitutional defence. Unfortunately, any recall or taking of power beyond the 300 MW of recall allowed in thePower Contract is illegal - intended or not. So, yes, Cathy Bennett is right - it is complex. She should know. She helped get it through. She should have the courage to admit it. Now these issues are in front of the Supreme Court of Newfoundland and Labrador. Why? Because courage of conviction when it comes to protecting your own people from harm is the number one requirement of any leader of any political party. Complex indeed.

The Power Contract vs. the Water Management Agreement

What most Newfoundlanders and Labradorians do not understand is the Lower Churchill hydro development is built on one foundation - the Water Management Agreement imposed by the Public Utilities Board on CFLCO and therefore Hydro-Quebec. The other thing they are not readily aware of is that when this agreement is found unconstitutional there is no foundation to build the Lower Churchill dams.
The Supreme Court of Canada, in 1984, found the Reversion Act to be unconstitutional:

"Where, however, the pith and substance (true purpose) of the provincial enactment is the derogation from or elimination of extra-provincial rights then, even if it is cloaked in the proper constitutional form, it will be ultra vires (unconstitutional because it is outside the province's powers)."

When I stood in the Supreme Court of Newfoundland and Labrador last month, challenging the Water Management Agreement (WMA), I outlined the many critical ways this agreement broke the Power Contract of 1969. I did so not to protect Quebec, but to stop our own government from delivering us to them. The following points were gone through point by point to illustrate to Madame Justice the depth of the betrayal. On this, Memorial Day in Newfoundland, I believe it is important to make these points public so the people of the province understand the sacrifice before it they are lead into it.

1. Power Contract:
"Recapture means any withholding from the power and energy agreed to be sold hereunder which may be made by CFLCO in accordance with the provisions of, and within the limits stipulated by, Section 6.6..."

WMA:
No definition for recapture.

My take: Any power generated at the Upper Churchill, except the power allocated to Twin Co that now belongs to Nalcor, and the 300 MW allocated to the province, cannot be taken from the Upper Churchill facility. Key phrase here is: "made by CFLCO".

2. Power Contract:
"Applicable Law: This Power Contract shall at all times and in all respects be governed by, and interpreted in accordance with, the laws of the Province of Quebec."

WMA:
"Applicable Law: This Agreement shall be construed, interpreted and enforced in accordance with, and the respective rights and obligations of the parties shall be governed by, the laws of the Province (NL) and the federal laws of Canada applicable therein, and each party hereby irrevocably and unconditionally submits to the exclusive jurisdiction of the courts of the Province..."

My take: The Power Contract puts the rights of the contract in Quebec, and thereby all the powers of the contract. The WMA changes the location of those rights to NL, with the goal of changing constitutional jurisdiction. In other words, by way of legislation the government is attempting to alter the practical jurisdiction of Quebec over the operation of the Upper Churchill.

3. WMA
"Entire Agreement: This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, undertakings, negotiations and discussions, whether written or oral."

My take: It pretty clear, the WMA states it is now the predominant agreement, which automatically subordinates the Power Contract and forces CFLCO to recognize the requirements of the WMA over those of the Power Contract between CFLCO and Hydro-Quebec.

4. Power Contract
"The parties hereto acknowledge that it is desirable for Hydro-Quebec to have the benefit of operational flexibility of CFLCO's facilities... Accordingly... Hydro -Quebec may request CFLCO to operate the Plant (includes reservoir) so as to supply Hydro-Quebec's schedule of power requirements...Hydro-Quebec may require deliveries which have the effect of varying the amount of water to be carried in storage at any time..."
   
WMA
"The Independent Coordinator (appointed by the NL government), shall, based on the information provided by the Suppliers (Nalcor and CFLCO), and in the exercise of reasonable judgement, establish short and long term Production Schedules for all the Production Facilities on the Churchill River...The Independent Coordinator shall determine the total power to be produced...The Independent Coordinator shall determine and prepare the Production Schedules which shall specify the amount of power to be produced by each Supplier's Production Facilities in accordance with this Agreement."

My take: It's pretty clear. The WMA takes the right of control of production given to Hydro-Quebec and gives it to the "independent coordinator" who is an appointee of the NL government.

5. Power Contract
"Either party may at any time, for the purpose of safeguarding human life or protecting from major damage the storage, generating or transmission facilities of CFLCO or the Hydro-Quebec system, discontinue or reduce, but only to the extent necessary, the supply of power and energy hereunder."

Power Contract
"The Firm Capacity shall be available at all times when Hydro-Quebec has requested it. In addition whenever additional capacity can, in the opinion of CFLCO, be made available, such capacity shall also be available to Hydro-Quebec on request."

WMA
"CFLCO and Nalcor shall adhere to the Production Schedules set by the Independent Coordinator... Each Supplier shall continue to have the same rights to store water in its reservoirs as it did prior to this agreement, while at the same time recognizing the requirement to, allow Energy Banking (the taking of power from the Upper Churchill from CFLCO to Nalcor) by the other Supplier pursuant to the terms of this Agreement."

My take: Under the Power Contract Hydro-Quebec has the rights to all the power produced at the Upper Churchill, and only loses control in case of a disaster or protecting its electrical system. Because it has first rights, any power taken from it, including so called Banked Energy to Nalcor would have to be purchased from Hydro-Quebec, unless it waived its rights to that power and money - which is highly unlikely. This is simply an attempt by Nalcor to force Hydro-Quebec to use or lose the power potential of the Upper Churchill - which conflicts with the Power Contract.

6. WMA
"In no event shall the generating Capability, storage capacity, or transmission Capability available to a Supplier from all Production Facilities on the Churchill River be less than the amounts of then available generating Capability, storage capacity, or transmission Capability of the Production Facilities owned by that Supplier on the Churchill River."

Power Contract
again: "The parties acknowledge that it is desirable for Hydro-Quebec to have the benefit of operational flexibility in relation to the Hydro-Quebec system. Accordingly: Hydro-Quebec may request CFLCO to operate the Plant so as to supply Hydro-Quebec's schedule of power requirements, provided that no such request shall be less than the Minimum Capacity...Hydro Quebec may require deliveries which have the effect of varying the amount of water to be carried in storage at any time..."

My take: The WMA here requires the Upper Churchill to operate at full capacity which gives Nalcor the flow of water they need to run the Lower Churchill dams. Without this clause, Hydro-Quebec could just keep running the dam for its requirements, as the Power Contract grants them the right to, and the Lower Churchill dams would be forced to run at just 20% capacity - a financial disaster.

7. WMA
"Energy Benefits: Energy Benefits for each Supplier shall be determined by the Water Management Committee, in accordance with the Agreement, for each period established by the Water Management Committee, which period shall not exceed a year...Energy Benefits means the Energy accruing to a Supplier for a period as a result of this Agreement in excess of the Energy that would be accrued to such Supplier for such period in the absence of this Agreement..."

Power Contract
Again "The Firm Capacity shall be available at all times when Hydro-Quebec has requested it. In addition whenever additional capacity can, in the opinion of CFLCO, be made available, such capacity shall also be available to Hydro-Quebec."

My take: The WMA gives the Water Management Committee the right to give power produced at the Upper Churchill to Nalcor, without a power purchase agreement with Hydro-Quebec to compensate it, at its terms, which translates into a forced recall of Upper Churchill power to Nalcor. In other words, Nalcor gets to take power that it has no right to, and doesn't pay anything for it. Great plan, except it's already proven law by the Supreme Court of Canada that this is unconstitutional and therefore illegal.

8. Power Contract
" Force Majeure: contract not terminated. No event or force majeure or of default hereunder shall give rise to, or result in, the termination of this Power Contract..."

WMA
"Force Majeure means an event, condition or circumstance or combination of events, conditions or circumstances beyond the reasonable control and arising without the fault or negligence of the party making a claim to section 14.4 of this Agreement, including, without limitation:...(iv) action of any government, legislature, court or other governmental authority, compliance with applicable law, regulation or order if a governmental authority... An Effected Party shall be excused from the performance of its obligation hereunder or liability for Damages to the other party, if and to the extent it shall be delayed in or prevented from performing or carrying out any of the provisions of this Agreement, except the obligation to pay any amount when due..."

My take: In other words, while technically the agreement says the Power Contract can not be "adversely effected" it gives both CFLCO and Nalcor an out from respecting the contract by way of this WMA. It says a government action, regulation, act, etc can be a considered a Force Majeure, technically out of  the control of both CFLCO and Nalcor, yet both are owned primarily by the government. The effect of this clause is to give Nalcor and CFLCO legal cover from being sued by Hydro-Quebec for violating the Power Contract as they are simply following legislation. This clause makes obvious the government's intention to destroy Hydro-Quebec's rights under the Power Contract.

There are any number of additional issues with the WMA including such things as maintenance of the facility, and the like that also conflict with the Power Contract. What I have outlined above are some of the main points. What any Court must decide is whether or not the WMA "derogates" the terms of the Power Contract. If it does then its unconstitutional. Derogate is defined as: " To take away; detract. To deviate from a standard or expectation; to go astray." That is the standard the Supreme Court of Canada set down in the Reversion Act case of 1984. That decision was unanimous, and therefore that standard can not be altered by any court. The quote I placed in the second paragraph of this article rings loudly. Here is the second quote from that decision that you need to know:

"even if the flow of electricity to Quebec continued at the same rate and at the same price after coming into force of the Act, it would then be in the form of a privilege rather than an enforceable right. All this, in my opinion, points to one conclusion: the Reversion Act is a colourable attempt to interfere with the Power Contract and thus to derogate from the rights of Hydro-Quebec to receive an agreed amount of power at an agreed price."

A few of the local press, and some PC Party operatives have suggested what I am doing by challenging this agreement is assisting Hydro-Quebec. Some of my interested friends have noted that Hydro-Quebec hasn't said a word about it. Frankly, nobody has. Why? Well in Hydro-Quebec's case they are likely mad I've tripped up their ambush of Newfoundland and Labrador - waiting as they are for us to build it and then shutting us down in court..$10 billion later. In everyone else's case, well it's like a collective holding of the breath. So far at least $800 million has been spent by our government, and people cannot comprehend such a massive amount of money would be spent on something unconstitutional and therefore illegal. This also involves the governments of Canada and Nova Scotia.

Billions are at risk. The silence is deafening, but the facts remain.

Syria, Pandora's Box and a Game of Chicken

Most readers of this blog know it deals with primarily Newfoundland and Labrador

politics, the odd time national politics, and once in a while international topics. This post involves the latter.

Syria has been weighing heavily on my mind these days. In one way it is just another

implosion of a middle eastern political system - unrelated to the uprisings from the Arab Spring. In another way, it is the most dangerous manifestation of the Spring. Like Tunisia, and Libya it has a colonial past. Like Egypt it is focused more on religious rule than actual freedom.

It seems that western politicians and press consistently make the same, very strategic

mistake when they portray these uprisings as an awakening of a spirit of freedom in the
Arab peoples. In fact, when the Arab people rise up they are seeking a religious resolution not a political solution. There lives center around their religious ideals, not political
ideals. For them the revolution is a means to institute Islamic government, which is
central to their core values. The freedom achieved by the Spring gave them the
opportunity to replace secular governments and replace them with Islamic governments.
In fact, that is happening in every case. Furthermore, not one Islamic government has
been overthrown. So yes, they now have governments that reflect their beliefs, but their
beliefs are not necessarily aimed at peace.

The other commonality that keeps rearing its head is the Sunni - Shia blood-letting.

Whether it be the war in Iraq or the Arab Spring, and now Syria, this 1300 year old blood feud has been let out of Pandora's Box. Whether by design or coincidence this hatred has been used by NATO and the Russian bloc ( I include Iran in this one). While the old secular governments were notorius for their rights abuses, so are the Islamic ones. While the old secular dictatorships were controlled by one superpower or another, so are the new Islamic ones. Now, however, the evils unleashed from Pandora's Box are on Israel's door step. That is one primary reason why the Syrian war is dangerous. However, the biggest reason why the Syrian war is dangerous is the game of poke-in-the-chest that has been reignited between the United States and Russia.

Some media have attempted to portray Syria as a proxy war between the US and Iran, or

Iran and Israel, or even between Iran and Saudi Arabia. The truth is Russia controls the
Syrian government. It also controls the Iranian government. It does this with business, but just as importantly by arms sales. It also claims these countries as entities in its "sphere of influence", and therefore crucial to its national interest. The US claims the defence of Israel, and more "moderate" Arab countries as in its national interest. The difference really is geographic. While Syria, and Iran essentially border Russia, the US has no such argument. The old spheres of influence from the cold war days crumbled with the Berlin Wall, and the US has aimed to take advantage. What happens though when Russia decides it must make a stand, and refuses to retreat any further? The answer is Syria.

Frankly, NATO abused the United Nations resolution authorizing a no-fly zone in Libya - a very serious abuse. Instead of keeping Libyan planes and choppers out of the air it became the air force for the rebels. It took sides and determined the outcome. Now the Russians and Chinese no longer trust that option. The only option NATO has is to impose a unilateral no-fly zone. Russia answered that option with the transfer of state-of-the-art S300 anti-aircraft missile systems. It also heavily reinforced its only naval base in Syria. For every move the US makes (Patriot missiles systems in Turkey and Jordan, etc), the Russians counter. There is no backing away from this game of chicken.

Unfortunately for Israel, it is damned if it does and damned if it doesn't. It can't directly

intervene as that would provoke Russia, and cause moderate Arab governments to
become neutral or even hostile toward Israel. It doesn't want the Syrian rebels armed as
those arms would most certainly end up in the hands of Hezbollah and other Islamic
extremists. And, despite the anti-missile umbrella, Israel would almost certainly be
targeted with missiles from Hezbollah, Syria, and likely Iran. The one country that has no good options is Israel. Likely, and very ironically, the best case scenario for Israel is a victory by the Syrian government and a return to the status quo.

What is needed in all of this is a sense of place. The US needs to realize its place in the

world is not that of overlord. It needs to reject the single most dangerous doctrine it has
ever adopted - Bush's pre-emptive strike doctrine. It needs to adhere to the principles of
international law - even when it may not suit its interest. Obama's arming of the rebels
against another state is considered an act of war under international law, yet it is treated
as if it were nothing more than a policy decision. That is the kind of arrogance that causes instability and tragedy. Frankly, the Syrian government is fighting an armed insurgency according to international law. It is using force. That is legal under international law.

There have been civilian casualties and displaced people as a result. That has been the

case in every war since the beginning of time - ugly as that truth is. The Syrian
government is not fighting unarmed civilians. It is fighting an armed force that got its
arms from somebody, and is often not even Syrian citizens. If a similar situation were to
occur in Canada or the US, you can be sure there would be a similar response.

Were chemical weapons used? Who knows. Maybe they were. However, does it really

make sense that the Syrian government would use chemical weapons to kill between 100-150 people and thereby invite the US to intervene? In a war that's seen tens of thousands die? That simply doesn't make sense on any level.

What the Syrian situation needs is for both superpowers to pull back. Quit upping the

ante. Allow the Syrians to finish it between themselves. It's not a great way to look at it,
but it's a lot less dangerous than a game of chicken between the US and Russia.

Why Muskrat Falls MUST be Defeated

Why oppose Muskrat Falls? Having studied the project, the industry, and the demographic/economic position of the province there are many reasons. I won't get into any of them here except one. Muskrat Falls, indeed the entire Lower Churchill project, is based on an unconstitutional foundation - the Water Management Agreement imposed by the Public Utilities Board.



As I stood in the Supreme Court of Newfoundland and Labrador this past week a distant decision weighed on my mind - the Supreme Court of Canada decision of 1984 on the Water Reversion Act. So, I began my final argument with a quote from that decision that eerily mirrored the government's language of today:

"It was argued by the Attorney General of Newfoundland and Labrador that control over the power generated at Churchill Falls is essential for the effective management of its water resources and to meet the energy needs of the Province. However, it is not for this Court to consider the desirability of legislation from a social or economic perspective where a constitutional issue is raised."

Now have a read of the Water Management Agreement's opening words:

"it is declared to be the policy of the Province that, amongst other things, all sources and facilities for the production, transmission and distribution of Power and Energy in the Province should be managed and operated in a matter that would result in the most efficient production, transmission and distribution of Power and Energy and, where necessary, all Power, Energy, sources and facilities of the Province are to be assessed and allocated and re-allocated in the manner that is necessary to give effect to such a policy."

In other words, Nalcor is taking over the operational control of the Upper Churchill plant, and will "allocate and re-allocate" the power generated by it so its lower Churchill facilities will be able to function.



Essentially, the provincial government is attempting to achieve most of the objectives of the Reversion Act of 1984, just by different means. As we all know, the Water Management Agreement is meant to allow Nalcor to take power from the Upper Churchill when the Lower Churchill does not have enough water to operate, and then send that power back to the Upper Churchill plant at its convenience. Essentially, recalling power when it wants from the Upper Churchill.



The Power Contract defines recall as:

"...CFLCO may, on not less than three years prior written notice to Hydro-Quebec, elect to withhold from the power and energy agreed to be sold hereunder blocks at a specified load factor per month...not more than 90%, which blocks in the aggregate shall not exceed during the term hereof 300,000 kilowatts for a maximum withholding of 2.362 billion kilowatts per year."

In other words, only 300 MW of power can be withheld by CFLCO. The rest must be offered for sale to Hydro-Quebec. So, if Nalcor wanted to take power from the Upper Churchill it must reach an agreement with Hydro-Quebec to buy that power from them. Then consider the finding of the Supreme Court of Canada on who owns the power produced by the Upper Churchill:

"...the company signed a contract (the Power Contract) with Hydro-Quebec whereby it agreed to supply and Hydro-Quebec agreed to purchase virtually all of the hydro-electric power produced at Churchill Falls for a term of 65 years."

The Supreme Court of Canada found that "virtually all" the power "produced at Churchill falls” must be sold and supplied to Hydro-Quebec - Not from Muskrat Falls, or Gull Island. Nalcor and the government have attempted to change the ownership of power produced at the Upper Churchill, and place it in their control - in direct contravention of the Power Contract - which is unconstitutional.



In fact, the Supreme Court of Canada further stated, and this speaks directly to the Water Management Agreement:

"As soon as the Reversion Act came into force, Hydro-Quebec's right to receive power according to the terms of the Power Contract would be effectively destroyed. Even if the flow of electricity to Quebec continued at the same rate and for the same price after the coming into force of the Act, it would then be in the form of a privilege rather than an enforceable right. All of this, in my opinion, points to one conclusion: the Reversion Act is a colourable attempt to interfere with the Power Contract and thus to derogate from the rights of Hydro-Quebec to receive an agreed amount of power at an agreed price."

The government and Nalcor both argued throughout the hearing that the legislation says "no adverse effects" to previous power contracts are allowed - and that is what the Water Management Agreement says, but that's not the standard set by the Supreme Court of Canada. It said no "derogation" of rights. Derogation of rights means taking away of rights - whether it's adverse or not is subjective and irrelevant according to the Supreme Court.



So why did Williams and company use that phrase instead of the one insisted upon by the Supreme Court? It's quite simple. They tried to make it constitutional by including language that on the face of it seemed to safeguard Hydro-Quebec's rights and therefore be constitutional, but check out what the Supreme Court said on the Reversion Act:

"Where however the pith and substance of the provincial enactment is the derogation from or elimination of extra-provincial rights then, even if it is cloaked in the proper constitutional form, it will be ultra-vires. A colourable attempt to preserve the appearance of constitutionality in order to conceal an unconstitutional objective will not save the legislation."

So, why would Williams attempt to get around Hydro-Quebec this way? People close to him that I’ve interviewed suggest its his ego. That he was so obsessed with getting the best of Hydro-Quebec, and being recorded as the one who did it in the history books, that he became reckless. Perhaps that is true. I don’t know the man enough to be certain. However, I am certain that once the terms of the Water Management Agreement are forced on Hydro-Quebec, they will sue as they always have. When the government and Nalcor argued in Court that I was merely speculating as to what could happen, I brought it to the Court's attention that Quebec has never once left a challenge to their rights under the Power Contract go undefended. That there is a long history of Court bouts and that Quebec has not lost a single case. In fact, on the balance of probabilities, it is almost 100% certain Quebec will do the same in this case as it has in the past. The difference between this time and the Reversion Act attempt in the 1980's is back then the government had the sense to go to the Supreme Court of Canada first before it implemented the agreement or spent any money. That way it was just out the legal fees. This time they are attempting to build an entire dam complex, and transmission system, estimated to cost between $7-10 billion first. Of course that means adding that cost to our gross debt of $13.4 billion. But that isn't where it ends. Once the dam is built, Hydro-Quebec could easily refuse to ever come to an agreement with us, and the dam would operate at 20% capacity until at least 2041. The financial impact of that is permanent financial devastation to the people of the province.



The government's own legal opinion, in the publication "Legal Options", states:

"If a court followed this reasoning, CFLCO would be in breach of the Power Contract once it started diverting power to Newfoundland and Labrador from Hydro-Quebec. In these circumstances, Hydro-Quebec would pursue monetary damages from CFLCO. The amount of such damages cannot be accurately predicted, but would be significant...Any level of damages would be expected to drive CFLCO into insolvency and likely bankruptcy."

Bottom line, even though that legal assessment referred to the Section 92A strategy to get Upper Churchill power, it equally applies to the Water Management strategy.

This is why I have brought the fight to the province and Nalcor, to stop them from allowing Hydro-Quebec to destroy us before they get the chance. Yes, a lot of money has been spent, but nothing compared to what would be in store for us. I just couldn't stand by and watch Williams and company do this to us.